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Monday, October 17, 2016

Macro Musings Podcast: Izabella Kaminska

My latest Macro Musings podcast is with Izabella Kaminska. Izabella is part of Financial Times Alphaville, where she has been since 2008. She has written extensively on monetary policy, fiscal policy, financial technology, and is key force behind the Financial Times Festival of Finance. As a longtime follower of her work, it was a real treat to have her on the show.

We started our conversation by talking about blockchain technology and its implications for the payment system. Izabella is not optimistic about blockchain's future and wonders whether it will fulfill the expectations and hopes many observers have set out for it.

Next, we move on to the topic of universal banking. This is the idea that a central bank would open its balance sheet to anyone, including households and non-financial businesses. Doing so would solve the bank run problem and reduce the probability of a financial crisis. There are already movements in that direction with introduction of the Fed's overnight reverse repo program (RRP) and derivative houses opening accounts with the Chicago Fed. In the limit, universal banking would mean individuals could have personal checking accounts at the Fed. While this might solve the bank run problem, it would also mean a much larger government role in financial intermedation. We discuss why this would probably end very badly.

Izabella then discusses her take on unconventional monetary policy, especially the use negative interest rates. She is very critical of negative interest rates and explains why. Our conversation then segues into what can be done by policymakers during a deep recession.

We conclude by taking a look at the book Trekonomics, by Manu Saadia, and consider its implications for future of economic growth. We also spend some time comparing the economics of Star Trek to Star Wars.The conversation was fascinating throughout.

You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above. And remember to subscribe since more shows are coming.